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THE WAR RISK INSURANCE ACT
The War Risk Insurance Bill 1 (H.R. 5723) which was approved
October 6 last is one of the most important items in our list of war-
time legislation. It embodies a comprehensive program for : (a) the
support of the families of the men in service; (b) compensation for
those killed, disabled, or enfeebled in service, together with pro-
vision for the re-education of the disabled; (c) voluntary insurance
at low rates, administered by the government.
Prior to the present Great War governments had taken few
steps to relieve, distress in the families of soldiers, or to provide in
advance for the future of those who returned from the front, or
for their families should they not return. In every past war the
soldiers and their families have indeed suffered more than perhaps
any other section of the population. There was some relief by
the individual states during our Civil War, 2 but decentralized
administration combined with scanty knowledge of scientific
relief decreased the effectiveness of the aid offered. The pension
system adopted by the government has been notoriously abused:
the five billion dollars spent for this purpose have been used for
political aggrandizement rather than for adequate relief.
All the belligerent countries, realizing the necessity of protecting
living standards at home and of freeing the soldiers from anxieties,
have provided some form of government aid to the families of men
in service. The amounts of these allowances vary widely, but they
are usually graduated according to the size of the family. 3 In
1 The War Risk Insurance Act here under discussion is to be distinguished from
the War Risk Insurance Act of September 2, 1914, which pertained to shipping.
2 See an article by Carl R. Fish, "Social Relief in the Northwest during the
Civil War," American Historical Review, XXII (January, 1917), 309-24.
> Canada provides a flat separation allowance irrespective of the size of the
family. This is supplemented, however, by grants from the Canadian Patriotic
Fund graduated according to the size of the family and the relative cost of living in
the locality. For a description of the Canadian system see S. Herbert Wolfe, Care of
Dependents of Enlisted Men in Canada, Children's Bureau, "Miscellaneous Series,"
No. 10; Paul U. Kellogg, The Patriotic Fund of Canada, American Red Cross Bulle-
tin 155; H. R. Y. Reid, "War Relief in Canada," National Conference of Social Work
(1917), pp. 126-39.
462 JOURNAL OF POLITICAL ECONOMY
Great Britain and Russia government allowances are paid to the
wives and children of every man in the service irrespective of eco-
nomic need, while in other countries aid is given only if the families
are actually in need of assistance. 1
In 1916, Congress took tardy steps to relieve the distress among
the families dependent upon enlisted men in the Army during
their service on the Mexican border, but the relief offered was poorly
co-ordinated, 2 and the payments were made irrespective of the
number of dependents.
Soon after our formal declaration of war the American govern-
ment took steps providing for the families of men in service. The
Council of National Defense appointed Judge Julian W. Mack, of
Chicago, to draft legislation to provide not only government allow-
ances but also compensation to the disabled, together with pensions
for widows and dependents.
Secretary McAdoo, pursuing an independent investigation,
called a conference of life insurance officials on July 2 to consider
whether insurance should be offered by the government or by the
private companies. The private companies had been compelled to
levy prohibitive premiums because of the great extra risk and the
lack of any adequate war mortality tables. In some cases the
yearly premiums ran as high as $100 per $1,000 of insurance. 3
At this July conference Vice-President Woodward, of the Metropoli-
tan Life Insurance Company, alone made a definite offer. He
stated that his company would write a total of $300,000,000
worth of insurance at a yearly premium rate of $58.00 per $1,000.
By a vote of 103 to 4 the insurance men finally approved the
issuing of insurance by the government. 4 A committee of insur-
ance experts appointed by Secretary McAdoo to advise the govern-
ment, however, later expressed itself as opposed to the method of
1 For a description of foreign systems see S. Herbert Wolfe, Governmental Pro-
visions in the United States and Foreign Countries for Members of the Military Forces
and Their Dependents, Children's Bureau, "Miscellaneous Series," No. n.
2 A total of $6,250,000 was appropriated by Congress for this purpose. The
allowance varied according to the amounts the soldiers had been previously contribut-
ing to the support of their families. The maximum monthly grant to any family was
$50.00. (39 Stat. L., 649, 801, 859.)
3 Commercial and Financial Chronicle, July 7, 191 7. * Ibid.
THE WAR RISK INSURANCE ACT 463
insurance proposed. The nature of this opposition will be discussed
later in this article.
Judge Mack, with the assistance of S. Herbert Wolfe, Julia C.
Lathrop, and others, drafted the bill during the month of July.
It was then submitted to Secretary McAdoo, who gave it his hearty
approval; transmitted to President Wilson, who in turn expressed
his appreciation; and was introduced simultaneously in the House
and Senate on August 10. Representative Alexander and Senator
Simmons were its sponsors in the House and Senate respectively.
In his letter to the President, Secretary McAdoo indicated that
the bill had two purposes:
Its main purpose is to grant a reasonable government indemnity against
the losses and risks incurred in the discharge of a patriotic duty to which the
government has called and forced the citizens. It aims to accomplish these
ends by granting a reasonable measure of indemnity against the risk of loss of
support of the bread-winner, or of life and limb, or present insurability at
But this was not all, for the Secretary declared, " It ought also to
check any future attempts at service-pension legislation by enabling
a man now to provide against impairment through old age, total
disability, or death resulting from other causes."
In discussing the question of possible expense, Secretary
It must be borne in mind that the government will not escape these ex-
penditures if this plan of compensation and insurance should be rejected, for
the pension plan would then be resorted to and the cost would likely exceed
that of the proposed plan. At the same time the pension system would not
provide the same benefits nor cover the subject in the same comprehensive,
human, and equitable way. No provision is made in our pension laws for
family allowances while the men are at the front, nor for rehabilitation, etc. 1
Plainly then one of the integral purposes of the act was to pro-
vide a substitute for disability pensions by means of a scientific
1 In a letter to Judge W. C. Adamson, chairman of the House Committee which
reported the bill, Secretary McAdoo further said, "This .... insurance and com-
pensation measure will be a substitute, or should be a substitute, for the pension
system as applied to the present war, and ought to make impossible, as it will certainly
make unnecessary, future pension legislation with all its inequalities and favoritism."
Sixty-fifth Congress, First Session, House of Representatives, Report No. 130, p. 3.
JOURNAL OF POLITICAL ECONOMY
system of compensation, and for service pensions by means of volun-
tary insurance issued at even lower than peace-time rates.
The opposition at the hearings and on the floor of Congress was
directed chiefly against the insurance features of the bill. The
House Committee voted to reduce the amount of insurance which
the soldier could take out from $10,000 to $5,000, but upon the
request of President Wilson the original amount was restored.
When finally approved the one great change from the original bill
consisted in the replacement of compensation graduated according
to the army pay, with liberal minimum limits by a scale fixed irre-
spective of military rank.
An appropriation of $176,250,000 was made to meet the
demands occasioned by the act. Of this, $141,000,000 was for
family allowances, $12,150,000 for the compensation provision,
$23,000,000 for the insurance fund, and $100,000 for administrative
The administration of the act was given, not to the Pension
Bureau, as advocated by some, but to the War Risk Insurance
Bureau. This Bureau had been created in September, 1914,
to insure vessels and their cargoes, and its functions had been
expanded by the act of June 12, 191 7, requiring the owners of all
American merchant ships touching at American ports to insure all
officers and men against loss of life and personal injury.
The various features of the bill are so arranged that they dove-
tail very effectively into one another. The allotment and allow-
ance provisions protect the families of the men while in service;
1 Secretary McAdoo, upon the advice of Captain Wolfe, had estimated the
total expenditures for the first and second years as follows:
Compensation for total disability
Compensation for partial disability. . .
Insurance against death and disability
t The estimates as to expenditures for insurance were undoubtedly
derived from the experience of Toronto, Canada, which by May, 1917,
had issued $42,000,000 worth of insurance, three-quarters of which was
carried by a municipal fund.
THE WAR RISK INSURANCE ACT 465
the compensation given for disability or death protects the soldier
or his family after he has left service; while the insurance features
permit the soldier or sailor to provide further protection against
death or disability in addition to that afforded by the compensation
clauses. These features will now be taken up in turn. 1
II. THE ALLOTMENT AND ALLOWANCE PROVISIONS
One of the first questions that comes to mind is, Why is it neces-
sary to provide stipends for the families of men in service, when the
government's policy has been to exempt men with dependents?
Though the farsighted policy of the administration in this respect
has made the number of dependent families far fewer than they
would otherwise have been, it has by no means eliminated them.
Vast numbers of men in service have dependents. They are:
(a) married men who were enlisted in either the National Guard
or the Regular Army and were consequently mustered into service;
(b) married men who, because of the severity of some local exemp-
tion boards, were conscripted for service in the first draft; (c)
married men who enlisted under assumed names, or without the
knowledge of their wives; (d) married men with dependents who
nevertheless waived exemption, either because of patriotism or a
desire to escape from their families; (e) single men who did not
have dependents at the time of their entrance into service, but
who, because of the death or disability of some other source of
support have since become the sole or chief support of parents,
1 For the text of the act see Public Document, No. 90, Sixty-fifth Congress, First
Session, H.R. 5723. For fuller explanation of the law and the methods of administra-
tion see Bulletins of the Bureau of War Risk Insurance: No. 1, Terms and Conditions
of Soldiers and Sailors Insurance; No. 2, Brief Outline of Family Allowances, Allotments,
Compensation, and Insurance for the Military and Naval Forces of the United States;
No. 3, Family Allowances, Allotments, Compensation, and Insurance for the Military
and Naval Forces of the United States (an explanation of the act by Judge Mack); No. 4,
Uncle Sam's Insurance for Soldiers and Sailors. An excellent unofficial statement of
the act is given in A.R.C. No. 207, Handbook of Information for Home Service Sections,
pp. 30-52. W. F. Gephart's note, "The War Risk Life Insurance Act of the United
States," Am. Econ. Rev., March, 1918, pp. 195-202, is suggestive in the insurance
466 JOURNAL OF POLITICAL ECONOMY
Furthermore, it is doubtful if the government can maintain its
policy of exempting men with dependents throughout the war.
The war, if long continued, will make tremendous demands upon the
man power of the country, and those at present listed under the
draft in Classes II, III, and possibly IV may be drawn upon. Some
system of relief is therefore necessary.
The bill provides for a system of "allotments" and "allow-
ances," the former from the men's pay, the latter from government
funds. The allowance is paid only if a previous allotment has
The dependents are grouped for the purpose of the act into two
classes: Class A, wives or children. The term "wife" includes a
divorced wife who has not remarried and to whom alimony has
been decreed, and a common-law wife with whom the man has
been openly living for two years prior to the declaration of war. 1
All the following who are under eighteen or, if over, who are help-
less, are regarded as children: legitimate children, stepchildren,
children legally adopted either six months before the passage of
the act or a similar time before entrance into service, and illegiti-
mate children whom the father has acknowledged in writing, or
toward whose support he has been ordered by the courts to con-
Class B, all others.
All men who have dependents in Class A are compelled to allot
a minimum of $15.00 a month and not more than one-half his
monthly pay. Within this maximum, the man must allot an equal
amount to that given outright by the government in the form of
allowances. This allotment cannot be waived by the man himself,
and it can be waived by the wife only when she produces evidence to
prove that she is able to support herself and the children without
assistance from the government. After the allotment has been
made the government adds an allowance graduated according to the
1 In England the question whether the de facto or dejure wife should be recognized
in the payment of separation allowances was most troubling. Indeed the conditions
disclosed led to the introduction of the new separation bill and a further attempt
at divorce-law reform. See E. S. P. Haynes, Fortnightly Review (January, 1918),
THE WAR RISK INSURANCE ACT 467
number of dependents. The amounts of the monthly allowances
are as follows:
a) Wife, but no children $15.00
6) Wife and one child 25 . 00
c) Wife and two children 32 . 50
d) For each additional child above two 5 .00
e) If there be no wife, but one child 5 . 00
/) If there be no wife, but two children 12 . 50
g) If there be no wife, but three children 20.00
h) If there be no wife, but four children 30.00
i) For each additional child over four 5.00
Men are not compelled to make allotments of their pay to
dependents in Class B, but if they do so the government will, under
certain conditions, add an allowance to the allotment.
The scale of monthly allowances for dependents in Class B
a) For one parent $10 . 00
b) For two parents 20 . 00
c) For every grandchild, brother, sister, or additional
parent 5 . 00
These allowances, however, will be paid only if members of Class B
are dependent either in whole or in part upon the enlisted man, and
if he makes an allotment of pay equal in amount to the allowance
given. The enlisted man, however, is not required to allot more
than one-half of his pay. If he is making no allotment to depend-
ents in Class A, he must assign a minimum of $15.00 monthly, but
if he is making such allotment he need only assign one-seventh of his
pay, or a minimum of $5 .00 monthly, in order that such dependents
in Class B may then receive the regular government allowance.
The sum of the allotments and allowances to dependents in Class B
must not, however, exceed the total amount habitually contributed
by the enlisted man to their support.
Not more than $50 . 00 can be paid in monthly allowances to the
dependents of any one man. Should this be insufficient to grant
allowances to all entitled to them, present wives and children take
precedence over divorced wives; all dependents in Class A take
precedence over all those in Class B. Payment of the allowance
468 JOURNAL OF POLITICAL ECONOMY
is not automatic, but application must be made for it either by the
man himself or by the beneficiary.
It is interesting to note that prior to the passage of this act
seven states had enacted legislation providing allowances for
dependents of soldiers and sailors with an average monthly allow-
ance of $22.50 for the dependent wife and of approximately $7.00
for a dependent child. 1 The sponsors of the bill indeed clearly
stated that state grants should be made to supplement the federal
system when the latter proved to be insufficient locally.
Excellent as this act is, it does not remove all necessity for
further financial assistance. There are several groups of depend-
ents who are not provided for by it: (1) Families of officers. Since
an officer is not compelled to allot any portion of his pay, no allow-
ance is made to his family by the government. The supposition
was that since an officer is a "gentleman," he will surely provide
for his family. 2 Many officers, however, have not done so, and
their families are suffering in consequence. (2) Parents, grand-
parents, etc. , to whom no allotment is made. Since the act does not
require enlisted men to allot a portion of their pay to their parents or
other dependents, a large percentage of the single men in service
are not doing so, even though it may be needed by dependents at
home. The government, however, offers an inducement to the
soldier to allot a portion of his pay by giving an allowance, and can
apply further pressure by means of a clause empowering the Secre-
tary of War and the Secretary of the Navy to withhold up to one-
half the monthly pay. This amount is to be treated as a deposit
drawing 3I per cent interest. (3) Families where the amount of
the allotment plus allowance is not sufficient to meet their real
needs. The maximum allowance per family is $50.00 per month;
this amount, plus the minimum allotment of $15.00, would afford
an income of $65.00 a month or $780.00 a year. Though this is
probably sufficient at the present time for most soldier's families, it
1 Maine, Vermont, New Hampshire, Massachusetts, Connecticut, Michigan, and
Wisconsin. For the scope and administration of these state systems see Katherine Z.
Wells, "State Action for Soldiers Families," Survey (September 29, 1917), pp. 570-71.
3 Judge Mack said, "It was not believed that it was essential to compel an officer
to do his duty to his family. We could leave that to them." War Risk Bureau Bulle-
tin, No. 3, p. 9.
THE WAR RISK INSURANCE ACT 469
is not sufficient for all. A family with several children, whose head
has either sought refuge in the Army or has been mustered in
through the federalization of the militia, will find it almost impos-
sible to make both ends meet upon such a sum.
Furthermore, the increase in the cost of living may render this
allowance inadequate in the future for many families. Investiga-
tions for the Shipping Board show that the cost of living on the
Pacific coast increased approximately 7 per cent from October 11
to February 1. Credit inflation is causing a rapid rise in prices
which cannot be expected to cease during the war. The govern-
ment must be prepared to revise the system of allowances should the
cost of living continue to climb. 1
Much distress has been caused by the delay in transmitting
allowances and allotments from the War Risk Insurance Bureau.
In justice to the Bureau it must be pointed out that the task has
been literally herculean. The Bureau had employed only some
forty clerks before the passage of the act; by February 1 its
officials numbered over eighteen hundred, while by April 15 its
force had increased to 3,300. Though the act was passed October
6, Secretary McAdoo has stated that "practically no applications
for allotments and allowances were received prior to December 1,
1917." 2 Within two months (from that time) the Bureau received
approximately 1,170,000 such applications. In 730,000 cases
investigation showed that "the soldiers had no dependents and
therefore no allotments were made nor could any allowances be
granted. Awards were made in 426,000 of the remaining 441,000
cases." 3 Trouble was encountered in 15,000 cases because of in-
complete application. By April 6 over 1,700,000 checks had been
mailed by the Bureau.
The Bureau was not able to mail the November checks till
January 14, the December checks were mailed February 7, and the
1 The failure of the English government to revise adequately its separation allow-
ances in the face of rapidly increasing prices has been one of the sources of discontent
in Britain. See Bulletin No. 237 of the United States Bureau of Labor Statistics,
Industrial Unrest in Great Britain.
* The Official Bulletin (February 8, 1018), p. S- Published by the Committee on
47© JOURNAL OF POLITICAL ECONOMY
January checks by February 18. The February payments were
likewise delayed. The work of the Bureau has now been systema-
tized, and such delay will probably not occur again.
The Red Cross through its Home Service sections is the logical
institution to offer supplementary assistance to all those families
whose needs are not met by the act. It can give the needed
plasticity and local attention. Perhaps more important than its
money grants are the possibilities of giving effective social service
in the form of advice and counsel to the families of enlisted men. 1
III. COMPENSATION PROVISIONS
The compensation features of the War Risk Insurance Bill
are but the logical extension of the principles of social insurance.
War is a distinctly dangerous trade, and it is but just that the
employer should provide compensation for injuries incurred by the
soldiers and sailors. The compensation offered is for diseases in-
curred as well as for injuries suffered "in the line of duty." The
contraction of syphilis or ghonorrhea will not, of course, be com-
pensated, since it results from "wilful misconduct." Unlike
the allotment and allowance features, compensation is provided for
officers as well as for men.
The original bill as drawn by Judge Mack and introduced into
Congress provided for a compensatory scale graduated according to:
(i) number of dependents and (2) pay received. For death the
scale of compensation per month was as follows:
a) Surviving widow without children, 25 per cent of pay but not less than
b) Widow and one child, 35 per cent of pay but not less than $40.00.
c) Widow and two children, 40 per cent of pay but not less than $50.00.
d) For each additional child up to two, 5 per cent additional but not less
than $5 . 00 for each.
e) One child with no widow surviving, 20 per cent of pay but not less than
/) Two children with no widow surviving, 30 per cent of pay but not less
1 The opportunities- and problems of home service together with the steps taken
to meet them by the Red Cross are discussed in an article by the writer in School and
Society, March 9, 1918, pp. 271-77.
THE WAR RISK INSURANCE ACT 471
g) Three children with no widow surviving, 40 per cent of pay but not
less than $35.00.
h) For each additional child up to two, 5 per cent additional but not less
than $10.00 for each.
*') Widowed mother, 20 per cent of pay but not less than $25.00
The original scale for total disability was as follows:
a) Man alone, 40 per cent of pay but not less than $40. 00.
b) Wife, but no children, 50 per cent of pay but not less than $55 .00.
c) Wife and one child, 55 per cent of pay but not less than $65 . 00.
d) Wife and two or more children, 60 per cent of pay but not less than
e) No wife, but one child, 50 per cent of pay but not less than $50 . 00.
f) For each additional child up to two, 5 per cent of pay additional but not
less than $10.00.
g) For dependent widowed mother, 10 per cent of pay but not less than
$10.00 in addition.
For persons so injured as to be in constant need of a nurse an
additional sum up to $20. 00 was allowed. The maximum monthly
payment to the family of any one man was fixed at $200 . 00.
This basis of compensation upon pay received was attacked
upon the floor of the House. Representative Black, of Texas, and
others protested against giving larger stipends to the dependents
of officers than to the dependents of enlisted men. Mr. Black
declared that the Mack bill preserved the "distinction of rank
and pay beyond the borders of the grave." 1 The democratic
nature of the draft was urged as a reason why discrimination should
not be practiced against the families of the enlisted men. By a
vote of 139 to 3 the House approved the Black amendment pro-
viding equal care for the dependents of officers and enlisted men.
As the bill passed the House, the following monthly amounts of
compensation for death were established: for widow and no
children, $35.00; for widow and one child, $45.00; for widow
and two children, $52.50; for each additional child, $5.00; for
one child but no widow, $20.00; two children, $35.00; three
children, $45.00; for each additional child up to two, $10.00;
for widowed mother, $30.00. It will be noticed that the new
1 Congressional Record, Sixty-fifth Congress, First Session, LV, 7719.
472 JOURNAL OF POLITICAL ECONOMY
monthly rate was, with a few exceptions, $5 . 00 more than the mini-
mum provided for under the Mack scale.
The scale of compensation for total disability also established an
equal basis of compensation for officers and men. The monthly
compensations provided for both classes were the same as the
minimum payments provided for under the original bill.
When the House and Senate bills went into conference, the
feature of equal compensation irrespective of rank or pay was
retained, but the scale was lowered. The scale of monthly com-
pensation finally adopted follows :
For death :
a) For widow alone, $25 . 00.
b) For widow and one child, $35.00.
c) For widow and two children, $47 . 50.
d) For each additional child, $5 . 00.
e) One child, but no widow, $20 . 00.
/) Two children, $30.00.
g) Three children, $40 . 00.
h) For each additional child up to two, $5 . 00.
i) For widowed mother, $20 . 00.
For total disability:
a) Man alone, $30 . 00.
b) Wife, but no child, $45.00.
c) Wife and one child, $55.00.
d) Wife and two children, $65 . 00.
e) Wife and three or more children, $75.00.
/) No wife, but one child, $40 . 00.
g) For each additional child up to two, $10.00.
h) Widowed mother, $10.00.
The final rates, therefore, not only established equal compensa-
tion for all members of the military and naval forces, but were
actually lower than the minimum grants afforded in the bill as
presented by Judge Mack. Equality was obtained, therefore,
by leveling the compensation of the officers to a lower point than
that originally guaranteed to the privates. 1 The discussion of the
wisdom and justice of this measure is given in a later section.
1 With the exception that in case of death a surviving child without widow receives
$20.00 instead of $15.00; two children $30.00 instead of $25.00; and three children
$40.00 instead of $35 .00.
THE WAR RISK INSURANCE ACT 473
The committee drawing up the bill was faced with a difficult
problem in providing compensation for partial disabilities. Com-
pensation on the basis of temporary total disability would be inade-
quate, because, while the soldier might be able to go back to work
within a few weeks, he might also be handicapped for life and
thus suffer a permanent loss of earning power. Two other methods
were possible: compensation for a stated number of weeks or com-
pensation based on the impairment of earning capacity irrespective
of a time limit. Though the former is the method used by most
states, 1 its only merit is definiteness and ease of administration.
The period in which the injured party suffers financially because
of his injury rarely coincides with the period for which compensa-
tion is given. Should compensation, on the other hand be based
on the loss of earning power, there is danger that the injured
person would not be anxious to rehabilitate himself, for by approach-
ing his previous earning capacity he would be cutting down his
The act is based on the principle of compensation for impaired
earning capacity without a time limit, for it reads: "if and while
the disability is partial, the monthly compensation should be a
percentage of the compensation that would be payable for his total
disability, equal to the degree of the reduction in earning capacity
resulting from the disability."
It is further enacted:
A schedule of ratings of reductions in earning capacity from specific
injuries or combinations of the injuries of a permanent nature shall be adopted
and applied by the Bureau. The ratings shall be based as far as is practicable
upon the average impairments of earning capacity resulting from such injuries in
civil occupations, and not upon the impairment in each individual case, 1 so that
there shall be no reduction in the rate of compensation for individual success in
overcoming the handicap of a permanent injury.
The plain purpose of this second section is to give the injured
man every inducement to rehabilitate himself. His compensation,
since it is based on the "average impairments of earning capacity,"
1 See chart showing details of the compensation laws of the various states, in
Bulletin No. 203 of the United States Bureau of Labor Statistics, Workmen's Com-
pensation Laws of the United States and Foreign Countries, p. 128.
2 Italics are mine.
474 JOURNAL OF POLITICAL ECONOMY
is not decreased if he succeeds in raising himself to his former earning
A further problem is, however, created by the terms of the act,
namely, what is meant by previous "earning capacity"? Is it
army pay or pre-war earnings in civilian occupations ? The word-
ing is not clear upon this point. Dr. Rubinow seems to believe
that the army earnings are chosen as the base 1 from which impair-
ments are computed. If this is so, there is a manifest injustice.
The army pay of the average soldier is not equal to the wages that
he has been receiving in civil life. To interpret the law in this
fashion would be to work a great wrong.
Complete justice is indeed not given by computing the impaired
earnings from the base of pre-war wages. If the war is to be of long
duration the soldier will have sacrificed a considerable period from
industrial life. Had he continued in industry, would not his wages
have increased markedly because of the experience that he would
have acquired ? To base compensation upon his earnings prior to
bis entrance into service does not allow him any compensation for
loss of potential earning power which he has sacrificed.
The wording of the act is so loose that the decision as to which
of these two bases is to be used will probably be made by the
director of the Bureau. Ideally the standard that should be used
is that of the wage which the soldier probably would have been
receiving when he was injured. Practically the determination of
this wage may be so difficult that it cannot be employed, in which
case the pre-war earnings should be used. The use of military
or naval pay as the basis of computation should under no cir-
cumstances be employed if it is possible to interpret the act
The act is noteworthy in providing for medical care. The
bill grants "such reasonable governmental medical, surgical, and
hospital services, and such supplies, including artificial limbs,
trusses, and similar appliances as the director may determine to be
useful and reasonably necessary." The fact that there is neither
a time nor a money limit to the amount of medical aid that can be
1 1. M. Rubinow, "Compensation for Invalids of the War," Survey (September 22,
1917), P- 543-
THE WAR RISK INSURANCE ACT 475
given marks this act as one of the few compensation laws that have
recognized the necessity of medical care. 1
The most important contribution which the act makes to the
theory of workmen's compensation is provision for the rehabilita-
tion and re-education of the disabled. It thus deals with a vital
problem that has been almost universally neglected by compensa-
tion legislation. The disabled person needs, not only a money
grant, but also training, so that his disability will be the slightest
possible hindrance to his re-entering industry. 2 Social efficiency, as
well as justice to the individual demands this. European efforts to
care for war cripples 3 undoubtedly induced Judge Mack to include
this provision in his bill.
There are three ways by which the government puts pressure
upon the disabled man to accept treatment — one negative and
the other two positive: (1) If he refuses training his compensation
is suspended. (2) If he accepts training and improves his economic
condition, his compensation is not cut down because of his assiduity.
(3) If he is prevented from pursuing a gainful occupation while
being trained, he is re-enlisted in the Army for this period. He
therefore receives army pay and his family is entitled to the family
allowances and allotments as before. 4
1 For an analysis of existing provisions for medical aid under workmen's com-
pensation, and an argument for liberal treatment see I. M. Rubinow, "Medical
Benefits under Workmen's Compensation," Journal of Political Economy, XXV
Qune, 1917), 580-620; (July, 1917), 704-41.
2 The way in which workmen are reduced by serious accidents from skilled to
unskilled labor is shown in John C. Faries', The Economic Consequences of Physical
Disability; A Case Study of Civilian Cripples in New York City, Publications of the
Red Cross Institute for Crippled and Disabled Men, No. 2.
3 A vast amount of literature has accumulated around the re-education of the
disabled. McMurtrie's "The War Cripple," Columbia University War Papers, Series 1,
No. 17, gives a succinct statement of the problem. Perhaps the best source is the
English periodical Returned to Life, edited by Lord Charnwood; the American Journal
of Care for Cripples, of which Douglas C. McMurtrie is editor, also contains much valu-
able material. For a complete bibliography on this topic see McMurtrie, A Bibliog-
raphy of the War Cripple. Publications of the Red Cross Institute for Crippled and
Disabled Men, No. 4.
4 Since this was written a bill has been introduced in Congress at the suggestion
of the Surgeon General to make the provisions of the Compensation Act apply to
badly crippled men receiving vocational re-education. Their families would thus
receive the compensation payable for total disability during the period of re-education
rather than the allotments and allowances.
476 JOURNAL OF POLITICAL ECONOMY
The exact methods to be used in re-educating the disabled are
left for future legislation. In the meantime the Surgeon General's
department is making provision for beginning the work while the
men are in service.
Several lamentable developments of pension administration
have been guarded against by the law: (i) In order to receive
compensation the man must obtain a certificate from government
medical inspectors within a year from his withdrawal from service,
stating that he is suffering from injury or disease likely to cause
death or disability. If death or disability does primarily result
from such injury or disease, compensation will be paid; otherwise
not. This prevents the practice which has prevailed of old soldiers
claiming compensation twenty and thirty years after the Civil
War for injuries received in that war. (2) Claim for compensa-
tion must be made within five years after the cause of such com-
pensation occurred. This has the further effect of preventing
widows from filing claims as an afterthought. (3) A woman who
marries a soldier later than ten years after he receives the injury
from which he dies will not receive compensation from the govern-
ment. The disgraceful spectacle of young women marrying old
soldiers for their pensions will consequently be avoided.
Though Congress passed this bill with all its barriers against
future pension legislation, it yet raised (by means of a "rider")
all existing pensions to widows to $25 . 00 a month. That Congress
intends to turn over a new leaf is therefore not clearly demonstrated.
IV. INSURANCE PROVISIONS
The most bitterly contested article of the bill was that pro-
viding government insurance. The reasons for including insur-
ance provisions in the bill were two: first, the non-insurability of
the risks by private companies; second, the forestalling of future
attempts at service pensions. The war has created two varieties
of non-insurability: (a) The practical impossibility of soldiers'
securing insurance from private companies. Many companies
refuse to write any policies; others have fixed prohibitively high
premium rates. Few will issue policies for less than $50.00 annual
payment on $1,000 of insurance; some placed the rate as high
THE WAR RISK INSURANCE ACT 477
as $100.00 per $1,000. (b) Many men now in good health will
come back from the war in such impaired condition that private
companies will not then insure them. Yet they may not be so
disabled as to come under the compensation provisions of the act.
Government insurance is then necessary to protect them.
The committee of experts from private insurance companies
appointed by Secretary McAdoo opposed optional insurance and
favored "increasing the amount of compensation provided, by a
grant on the part of the government of a stated amount of life
insurance to every fighting man without any premium." 1 This
alternative proposal was in effect a recommendation for a lump-
sum compensation payment in addition to the monthly instalments
already provided for; it was not insurance in any true sense of the
term. Mr. Parker in the minority report of the House Committee
centered his opposition upon the insurance feature and favored
increasing the compensation. 2 Though some opposition developed
upon the floor of the House, the insurance section was easily passed,
only five representatives voting against it.
The bill provides that every person in service may apply to the
Bureau without medical examination for from $1,000 to $10,000
insurance against death or total disability resulting from any causes
either during or after the war. The insurance provided is thus
general insurance and not exclusively war insurance. Only near
relatives can be named as beneficiaries. 3 The United States bears,
not only the extra mortality and disability cost resulting from the
war, but the cost of administration also, so that the premiums are
actually lower than the normal peace-time rates. During the war
and for not more than five years afterward the insurance is to be
so-called "term" insurance, holding for successive terms of one year
with no surrender value. Premiums are to be paid monthly and
deducted from the soldiers' and sailors' pay. The insured person
is given the opportunity of converting the term insurance within
1 Statement by Geo. M. Ide, chairman of this committee, The Nation (February 7,
1018), p. 158.
1 House of Representatives, Sixty-fifth Congress, First Session, Report 130,
Part 2, p. 9.
3 Parents, grandparents, children, grandchildren, wife, brothers, and sisters.
JOURNAL OF POLITICAL ECONOMY
five years after the war, without medical examination, into some
policy issued by the Bureau. If he does not do so the insurance
will automatically expire. The Bureau was also empowered by
the act to designate the forms of insurance for which the term
insurance could be exchanged, and to fix the premiums.
The Bureau of War Risk Insurance has stated that the term
policies may be converted into the following forms: (a) whole-
life, (b) payment life, (c) endowment, (d) other policies to be
announced later. 1 Especially significant is the Bureau's state-
ment that the premium cost upon the converted policies "will be
a fixed premium without expense charge. This means that it will
be cheaper than the now published rates of insurance companies because
the government will not charge for running or overhead expenses." 2
The government is plainly committed, therefore, to continue to
bear the cost of administration after the war.
A time limit of 120 days was fixed in which the men in service
could apply for the insurance. During this time the government
provided free and "automatic" insurance to the amount of approxi-
It had been thought at first that flat-rate premiums would be
levied irrespective of age, but the Bureau instead graduated them
according to years. The monthly cost for men of 21 is $0.65 for
every $1 ,000 of insurance; for men of 31 it is $0. 70 for every $1,000;
for men of 41, $0. 82 for every $i,ooo. 3 Since the annual premiums
1 Bureau of War Risk Insurance, Bulletin No. 4, Uncle Sam's Insurance for
Soldiers and Sailors, p. 5.
2 Ibid.; italics are mine.
3 The following table gives the monthly premium cost:
The rate goes up sharply after 50 years, until a man of 65 years pays a monthly premium of $3 ■ 35
per $1,000 of insurance.
THE WAR RISK INSURANCE ACT
will increase every year because of the man's greater age, an induce-
ment is given for early conversion into some other form of policy.
The insurance is not to be paid in a lump sum, but in 240
monthly instalments. Table I shows the monthly income which
various-sized policies will yield. Thus the widow of a man who
had taken out the full amount of insurance allowable would receive
$25.00 monthly compensation and $57.50 insurance, or a total
of $82.50. A widow and one child would receive a monthly
total of $92 . 50, and a widow and two children $105 .00 monthly.
6,000. . . .
7,000. . . .
8,000. . . .
9,000. . . .
IO,000. . . .
* Monthly instalments will be payable during the total and per-
manent disability of the insured even if the injured party lives longer
than twenty years.
It had been prophesied by enemies of the bill and feared by its
advocates that only a relatively small percentage of the men in
service would take out insurance. The Bureau embarked on a
vigorous selling campaign. The military organization, the Red
Cross, insurance agents, and other bodies were enlisted in pushing
the sale of policies. An officer in every camp was placed in charge
of the work. Two hundred experienced agents, under the direction
of Willard D. Straight, were sent to France to conduct the sale of
policies overseas. Table II shows the progress of the sales cam-
paign. 1 The time limit was extended from February 12 to April 12
to allow Major Straight an opportunity to reach all sections of the
1 These figures have been compiled from the announcements made from time to
time in the official Bulletin, published by the Committee on Public Information. See
issues of January 5, 18, 25, and 30; February 4, 9, 12, 16, and 19; March 7; April 17.
JOURNAL OF POLITICAL ECONOMY
overseas forces. The two months of extra time therefore allowed
five billion dollars more of insurance to be issued.
By February 18, 90 per cent of the men in military service within
the United States had taken out policies. The remarkable way
Total Number of
Total Amount of
Kearney. . ,
Sherman. . . .
in which the men in the army camps responded is shown in Table
III. 1 These figures show how false were the gloomy prophecies
that not over a quarter of the men would take out insurance.
The average-size policy issued is one of approximately $8,100.
The fact that so overwhelming a majority of the men in service
have taken out insurance removes all excuse for further service pen-
J The Official Bulletin (February 19), p. 7. The returns from camps Cody,
Sevier, Hancock, Bowie, McClellan, and McArthur were not sufficiently complete to
give the percentage of men insured.
THE WAR RISK INSURANCE ACT 481
sion acts. Though no figures have been computed showing the
average policy per officer as compared with the average policy per
enlisted man, the fact that the general average so closely ap-
proached the maximum indicates that the difference between
officers and men cannot be marked. This refutes the opinion
advanced by Mr. Chamberlain that a $5,000 insurance policy would
seem entirely unnecessary to most of the enlisted men. 1
This act is more comprehensive and liberal than that of any
other belligerent country. It not only protects the family of the
man in service and compensates them should he die or be totally
disabled, but protects the single man as well who has been disabled.
The man who is partially disabled is given a money grant as well as
every inducement and opportunity to educate himself. It affords,
moreover, an opportunity for the enlisted man to provide greater
protection for his family by offering him insurance at low rates.
Children who upon reaching eighteen years would pass from under
the compensation provisions can now be insured a good education.
Brothers and sisters can be provided for as well. In short, the
act enables the standard of living of the families of men in service
to be maintained and in some cases actually to be raised.
The more ultimate effects of the act are no less striking. It
removes the necessity and should remove the possibility of both
disability and service-pension legislation. That it will work a revo-
lution in the insurance business of the country is evident. The
insurance on the books of the Bureau on April 6 was nearly four
times as great as that of the largest commercial life insurance
company in the world and more than one-half of the total amount
of life insurance carried by private companies in the United States. 3
With the addition of future drafts the amount will swell still fur-
ther. Within a year probably between twenty and thirty billions
of dollars of insurance will have been issued. Not only has the total
'Joseph P. Chamberlain, "Insurance for Soldiers and Sailors," Survey (Sep-
tember 8, 1917), P- S°5-
* This includes neither the marine insurance carried by the Bureau nor the insur-
ance of men in the transatlantic merchant marine.
482 JOURNAL OF POLITICAL ECONOMY
amount of life insurance been increased in this fashion, but the
average governmental policy is of an unprecedented size. The
average sailor or soldier who has government insurance carries
nearly five times as large a policy as does the average New York
holder of life insurance.
Moreover, the importance of insurance has been impressed upon
the country as a whole and upon the men in service in particular in
such a manner that it should result in future expansion of the
The act undoubtedly means the continuance of the government
in the insurance business after the war. Private companies will
find the government to be their most serious competitor, and the
solution may be the creation of a state monopoly in the insurance
fieid. Secretary McAdoo indeed seems to favor increasing the field
of state insurance. 1
Admirable as the act is, there are many defects which must be
remedied and many administrative problems which must be solved
before it can achieve all the purposes which it was designed to
accomplish. Perhaps the most important defects are: (i) Officers
are not compelled to allot pay to their wives or children. (2) Allot-
ment of pay is not compulsory to dependent parents. (3) Compen-
sation for death or total disability is not given to dependent
brothers and sisters or to other near relatives. The force of this
objection is somewhat negatived by the power of protecting these
relatives by government insurance. (4) Compensation is given
irrespective of pay. This violates all the canons of good compensa-
tion legislation (for compensation should take into consideration
the previous standard of living). It is also likely to prove an
entering wedge for future pension acts, for it will be an easy matter
for a future Congress to raise the compensation scale. (5) The
provision for basing compensation for partial disability is so loosely
worded that much ambiguity is created. (6) The government has
1 See his letter to George M. Ide, president of the Home Life Insurance Com-
pany, in which he practically charged Mr. Ide with conducting a propaganda against
the Insurance Act, and concluded by saying, "If a propaganda against the War Risk
Insurance Bureau is beginning I shall be very happy to meet it. Such a propaganda
may produce many beneficial effects in widening the field of the War Risk Insurance
Bureaus activities." — The Official Bulletin, March 6, 1918 (italics mine).
THE WAR RISK INSURANCE ACT 483
assumed all the overhead expenses of the insurance business both
now and after the war. Some of this expense, such as the original
medical examination, and the soliciting of insurance by officers and
other government officials, is plainly in the nature of a joint cost and
impossible to segregate. But part , such as the expenditure attached
to the War Risk Bureau, can be easily segregated. To make no
charge for this during the war may be justified because of the vital
need for insurance. It is, however, impossible to approve of con-
tinuing this practice after the war. This would really amount to a
subsidy to the government insurance business. It would thus give
a false picture of the efficiency of government methods and would
give government insurance an unfair advantage over private com-
petitors. The case of state v. private insurance is one that should
be decided in a fair field.
The chief problems of administration which must be solved are:
(1) Working out, pending legislative action, of the standard to be
used in computing the previous earnings of those partially disabled.
As has been pointed out, the pre-war earnings seem to be the best
base which can reasonably be applied. (2) Determining the " aver-
age" impairments of earning capacity. This is a task that will
seriously tax actuarial skill. (3) Preventing policies from being
abandoned after the war. Such a dangerous trade as war inspires
men to take out insurance. With the coming of peace the burden
of paying even such low premiums as those attached to the govern-
ment policies will prove irksome to men who are carrying as much
as $8,000 and $9,000 of insurance. A large percentage of the men
will be tempted either to abandon their policies or to reduce them
to a smaller figure. The Bureau must pursue a comprehensive
and prolonged program of education if it wishes to avoid this proba-
Taken in its entirety the act bids fair to prevent the injustice
which occurred during and after our Civil War from being repeated.
It is also a very significant item in the state-socialistic program that
is being adopted in America under the stress of war conditions.
Paul H. Douglas